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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BMO economist Sal Guatieri detailed an interesting phenomenon in the U.S. economy with important implications (my emphasis),

“U.S. durable goods orders disappointed with a 0.5% advance in March, though a 14% annualized Q1 gain in nondefense capital goods orders still flags a hefty increase in business M&E spending, consistent with our call for 7% GDP growth. Of growing concern, supply-chain disruptions, port congestion, and chip shortages are causing orders to pile up, by 7.8% annualized in the past six months to near record highs for capital goods ex-aircraft. This includes 20%+ increases for metals and electronic equipment and a 14% rise for autos. A continuation of this trend could lead to both weaker growth and higher inflation.”

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“@SBarlow_ROB BMO: “Factories Taking Longer to Fill Orders”” – (research excerpt, chart) Twitter

***

BofA Securities economist Stephen Juneau welcomed the improvements in U.S. vaccinations and regional re-openings but saw signs of a pause in economic growth,

“Over 54% of the [U.S.] adult population has received at least one vaccine dose … Economic data, on balance, showed an improvement in activity since our last update. OpenTable’s measure of seated diners shook off the Easter distortions and rebounded sharply during the week ending April 26. Demand for motor gasoline was just 3% below its 2017-2019 average … However, some indicators continued to show a moderation in activity. Small business employment data from Homebase declined by 0.8% during the week ending April 25, suggesting greater labor market challenges may exist for small businesses as compared to others. Air travel continued to move sideways … In short, the economy continues to build momentum, but it’s not as broad-based as it was in early March.”

“@SBarlow_ROB BoA: ‘In short, the [U.S.] economy continues to build momentum, but it’s not as broad-based as it was in early March” " – (research excerpt) Twitter

***

Also from BMO, senior economist Robert Kavcic detailed the wild jump in Ontario cottage prices,

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“If you’re buying a cottage right now, make sure you really, really, like it—you might be stuck with it for a while. Indeed, the factors that have propelled this market to dizzying heights might be ready to crest soon. Vaccinations are broadening; listings are becoming more ample; and a different tone from the BoC has at least shifted the conversation a bit on interest rates (weekly surveys of price growth expectations have finally backed off a bit). While the recreational property market is certainly unique, valuations have never been this high when adjusted for interest rates and provincial income. We fully appreciate that those things often don’t matter, especially for a highend cottage, but they do provide a historical reference— and in that sense, we’ve almost flown off the charts. Even if we build in some permanence because of things like work-from-home and scarcity of waterfront, it’s still not hard to see a scenario where froth comes out and the last buyers in (especially in a blind-bid scenario) are faced with years of negative equity”

“@SBarlow_ROB BMO: “If That’s Not a Bubble (Houses), That’s a Bubble (Cottages)”” – (research excerpt) Twitter

***

Column: “Global economic recovery, not the Bank of Canada, driving loonie’s value”” – Barlow, Inside the Market

Diversion: “This geologist found the oldest water on earth—in a Canadian mine” – Maclean’s

Tweet of the Day:

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